Last August the Los Angeles Dodgers and Boston Red Sox shocked the baseball word with an unprecedented blockbuster trade. Superstars are typically not traded in August, but the Red Sox sent three of their stars west in the same trade. In return, the Sox received only a collection of non-elite prospects who made a minimal impact on the 2013 division winning team. Did the salary relief they gained make up for the immense talents they sent west? Though it did not seem possible at the time, the trade has worked out well for both sides as both have clinched division titles this season. But how did such an unusual trade turn out so well? The answer lies in the principles of individual player salary as a percentage of the team salary and dollars per win above replacement player.
Before examining the numbers of the trade, lets begin with the baseball aspect of the trade. The Red Sox were 60-66 at the time and on their way to a last place finish in the AL East while the Dodgers were looking to make a playoff push. Los Angeles eventually finished two games out of the second wild card spot but the front office and ownership certainly did all they could to upgrade the roster. In the trade, the Dodgers received Carl Crawford, Adrian Gonzalez, Josh Beckett, Nick Punto and 12 million dollars in return for James Loney and prospects Allen Webster, Rubby de la Rosa, Ivan DeJesus, and Jerry Sands.
Lets begin with the Dodgers. Boosted by a new TV deal, the front office had money burning a hole in their pocket that they were ready to spend on anyone. They had already acquired Hanley Ramirez from the Marlins, but when a team increases payroll from $97.6 million to $223.1 million acquiring multiple high priced players is within the realm of possibility. The Dodgers did just that in this trade by acquiring Carl Crawford ($20.9 million), Adrian Gonzalez ($21.9 million), and Josh Beckett (17 million). These acquisitions make sense for the Dodgers and Dodgers alone because they were the only team at the time operating under Jay-Z’s principle, “Money ain’t a thing.” With the highest payroll in the league, the Dodgers had the luxury of judging players solely on talent while ignoring the price tag. Crawford, Gonzalez, and Beckett were certainly seen as upgrades and long term contributors.
How much of an advantage is the Dodgers massive payroll? The contracts of Gonzalez and Crawford are respectively 20th and 24th in average annual value in the history of the game. Most teams are limited to roughly one or two of these players, such as the Rockies with Troy Tulowitzki and Carlos Gonzalez or the Twins who until recently featured Joe Mauer and Justin Morneau. The Dodgers have an astounding ten players making over $10 million this year, including Matt Kemp ($20.3 million) and free agent acquisition Zack Greinke ($19 million). We can illustrate this advantage even more drastically by considering these individual salaries as portions of the total team salary. By this method, these contracts do not seem steep at all. Crawford’s $20.9 million translates to only 9.4% of the teams payroll while Gonzalez’s $21.9 million represents $9.8% of the budget. Nick Punto and his $1.5 million salary amounts to little more than a rounding error as it makes up less than one percent of the 223.1 million.
Let’s compare these figures to the financial situation of the Tampa Bay Rays. The Rays sport a $61.9 million dollar payroll led by David Price’s $10.1 million 2013 salary. That is a bargain for almost any team in the league, but Price’s modest tag still takes up 16.3% of the Rays payroll. He is by far the highest paid player on the team and the Rays will soon have to choose whether to extend him at the cost of an even higher portion of their minute budget. Instead, the Rays will likely trade him to a team with a higher payroll like the Dodgers. If he was indeed traded to Los Angeles he would account for only 4.5% of their budget, roughly equivalent to the salary percentages of current Rays Ryan Roberts and Luke Scott. With a payroll three times the size of Tampa Bay’s, the Dodger’s hold an extreme advantage with their ability to acquire high priced and typically more talented players.
Lets now examine the Red Sox side of the trade. The Sox were not only able to shed three bad contracts but they also gained some useful prospects from the Dodgers. When factoring in luxury tax savings, the Sox saved over $275 million dollars in the trade. Additionally, each of the four players were past their prime, meaning that what may be a poor contract today may soon be one of the worst in baseball if the players follow a traditional aging curve. The Red Sox did not simply pocket their savings, instead they turning their savings into a seven midrange free agents who were not attached to draft pick compensation: Ryan Dempster ($13.2 million), Shane Victorino ($13 million), Stephen Drew, ($9.5 million), Jonny Gomes ($5 million), Mike Napoli($5 million), Koji Uehara ($4.3 million), and David Ross ($3.1 million). These seven players earned a combined $53.1 million this season, $8.2 million less than what the four players they dealt to the Dodgers last August are making this season.
If the savings were not enough, these free agent imports have been worth significantly more than last summer’s exports. For $53.1 million, the Red Sox purchased 13.75 wins above replacement, a mere $3.86 million per win. Compared to the traditional notion that a win is worth $5 million on the free agent market, the Sox found great value on the open market. When stacked against the $61.3 million the Dodgers spent on the four players they acquired from the Sox last summer and the paltry 4.37 wins above replacement those players contributed ($14 million per win), and it is not difficult to see how the Red Sox were able to make the leap from worst to first. The 2013 Dodgers are proving that extremely high payrolls are an advantage while the 2013 Red Sox tell us that shrewd use of resources to maximize productivity is also an advantage. Combination of the two, as the New York Yankees have done in the past, is what leads to dynasties.